By Staci Covkin
“Innovation is the conversion of a new idea into revenue and profit.”
- A.G. Lafley, executive chairman and former CEO of Procter and Gamble (P&G)
He would know. Under Lafley’s leadership in the 2000s, P&G’s market capitalization more than doubled, making it one of the most valuable companies in the world. Much of this was due to the company’s focus on innovation.
While many CPG manufacturers don’t have P&G-sized staff or budgets, successful innovation can be done by companies of any size. While new product success rates remain generally low, when new product innovation triumphs it brings in considerable sales and company growth. How? It starts by following a proven new product launch roadmap that helps predict future needs, evaluates new product and packaging concepts, assesses creative executions and reviews positioning statements.
According to IRI’s latest New Product Pacesetter report, 90 percent of top new brands earn less than $40 million in their first year. With this low rate of success, it’s critical to avoid costly mistakes when developing and commercializing a new product. Typical key mistakes include not understanding what appeals to your target market, launching new products based on ‘gut’ feelings and creating inadequate support plans. Above all, the biggest reason for new product failure is the absence of an innovation process and failing to test.
Innovation Strategies to Drive Growth
When planning to launch a new product, begin the process by exploring new and untapped opportunities by identifying a shopper-defined competitive landscape. Once growth opportunities have been researched, you can more confidently introduce and test new products that have the potential to drive incremental growth. Through a multistep survey and testing process, marketers and manufacturers can determine which product attributes, packaging and messaging are unique differentiators, have meaningful advantages and can drive sales, and how much advertising and trade should be spent in year one and beyond.
Companies that experience innovation success consistently demonstrate certain trademarks. These successful processes include:
- Clear Alignment - Create clear alignment around the definition and role of innovation within an organization.
- Broad Data Sources - Consistently use broad and multiple data sources to ideate and screen new product ideas.
- Support - Plan sell-in and ensure adequate support and activation as part of the innovation planning process.
To learn more about successful innovation strategies, and hear directly from two CPG companies that are mastering the innovation process, register here for the webinar I’ll be hosting on July 19, “Minimize Risk and Maximize Sales with Improved Innovation Strategies.”
If you have any questions on this topic in the meantime, don’t hesitate to reach out to me at Staci.Covkin@IRIworldwide.com.